EMPLOYEE BENEFITS

3 Months Ended

Mar. 31, 2012

NOTE NINE: EMPLOYEE BENEFITS

The Company's two subsidiary banks each have separate retirement and profit sharing plans which cover substantially all full time employees at each bank.

Capon Valley Bank has a defined contribution pension plan with 401(k) features that is funded with discretionary contributions by the Bank. The bank matches, on a limited basis, the contributions of the employees. Investment of employee balances is done through the direction of each employee. Employer contributions are vested over a six year period.

The Grant County Bank is a member of the West Virginia Bankers' Association Retirement Plan. Benefits under the plan are based on compensation and years of service with 100% vesting after seven years of service. The Bank has recognized a liability of $1,510,000 at March 31, 2012 for the unfunded portion of the plan. The following table provides the components of the net periodic benefit cost for the plan for the three month periods ended March 31, 2012 and 2011 (in thousands of dollars):

	Three Months ending
	March 31,
	2012			2011
Service cost	$	48		$	51
Interest cost		85			81
Expected return on plan assets		(114	)		(88	)
Recognized net actuarial loss		52			38
Net periodic expense	$	71		$	82

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

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+ Details

HIGHLANDS BANKSHARES INC /WV/ 10-Q